Economic Damages Calculation
We provide expert damages calculation and have testified in multiple state and federal courtrooms.
At the Knowles Group, litigation support services can help you ascertain if the plaintiff or defendant has suffered economic damages as the result of the incident. We analyze dozens of complex variables and conduct quantitative analysis to generate accurate damage calculations. Eric Knowles also provides economic expert witness services to testify to these calculations in the courtroom.
How are Economic Damages Calculated?
While our processes to determine this vary from case to case, we have a general outline that we use for calculating economic damages:
A qualified forensic economist begins by reviewing the case and determining which factors to include in the analysis. For an employment case, these can include earnings history, education, projected earnings, fringe benefits, work-life expectancy, loss of income, life expectancy, and post-separation employment. The economic expert then conducts a records review to collect data for use in the analysis. Using objective data and economic formulas, a forensic economist can accurately calculate the economic damages to an individual or company.
Types of Cases We Work On
The Knowles Group has experience calculating economic damages in thousands of cases throughout our 30+ years of experience. We can provide damages calculation for cases such as:
- Accident (Personal Injury and Wrongful death) – Loss of household services, medical expenses, lost earnings, future medical expenses, lost retirement, property damage
- Medical Claims – Malpractice claims, medical expenses, employment damages, mis diagnosis, birth injuries, surgical errors, failure to treat, product liability, delayed diagnosis
- Toxic Torts – Consumer products, occupational exposure, asbestos, mesothelioma, home exposure, shortened life expectancy
- Employment – Earnings history, projected earnings, fringe benefits, lost retirement, loss of income, wage growth
- Business / Commercial – Lost profits, intellectual property, expected value, projected revenues, present value, risk factors
- Real Estate – Property disputes, construction damage, inflation, taxes, appraisals, valuation, business loss, commercial real estate
Employment Damages Calculation
A records review will give us an idea of what the plaintiff’s past employment and earnings capacity looked like, what their future mitigating or alternative employment looks like, and what are the most reasonable employment opportunities. The answers to these questions and more will start to become apparent as we begin to review all records relevant to our economic analysis.
We’ll also examine the plaintiff’s answers to the defendant’s requests, the depositions from the plaintiff, and personnel records as we try to piece together a pre-incident picture of the individual. While damage calculations can stem from several components, our experience allows us to produce a realistic economic value of the individual or business, both before and after the incident.
The records review process can take us several hours to several weeks, depending on the amount of information that we have to go through. As we move forward with our review, we try to get an innate understanding of what the overall compensation picture looks like on an annual basis. We’ll also review personnel records to determine what fringe benefits look like.
Earnings Capacity & Earnings History
We have over 30 years of experience and understand how important it is to thoroughly and accurately assess the earnings potential of an individual. We retrieve from a wide range of accepted data sources and supplement that with other expert opinions and assumptions to paint an accurate pre- and post-incident picture of the individual.
The first step to determining earnings capacity for an individual is to analyze their past earnings. Earnings history can include various public and private records but not limited to:
- Earnings History
- Federal/State Tax Returns
- W2 Statements
- Social Security Administration
- State Unemployment
- Payroll Records
From the records review, we can develop intelligent insights into the earnings capacity of the individual as we try to determine the economic damages they sustained. This is paramount to past and future loss calculations as we try to ascertain how much the person was compensated on an annual basis.
For example, with a 63-year-old male, we will most likely have years of earnings history with a mature career arc.
But what if the plaintiff is an 8-year-old girl?
In this case, a records review won’t help us determine her potential earnings capacity. Instead, we’ll have to look at statistical and objective government survey data to get an idea. The U.S. Census survey and other sources can also provide earnings data that’s segmented by education.
We can also look to the parents for potential earnings for the child, adolescent, or young adult. There is no stronger correlating factor for the child’s future education and earnings capacity than the mother and father.
Calculating Business Damages
For P&L calculations, we look at the past Schedule C, or 1120S returns to project future income. Based on these available records, we can determine how an owner or company performed up until the incident date as well as during the past loss period. Any actual earnings must offset projected pre-incident income. We will provide a present value in today’s dollars on any loss of future cash flows to the business. .
The elements that we take into consideration are:
- Lost income – Income lost as a direct result of the event or incident.
- Other lost earnings – Effects of the damaging incident on the cost of labor, pensions, royalties, dividends, or interest.
- Fringe benefits – Health insurance and retirement benefits.
- Misc. expenses – Medical, dental, or rehabilitation expenses. Cost of medical equipment or hiring household services providers such as a maid, gardener, or caretaker.
Do you need help calculating economic damages for your case?
We Can Testify to Economic Damages
In addition to objective data, records, historical averages, and other government data, we can also lean on other sources of information, such as vocational experts. Through various data points and expert opinions, we can present a reasonable case in which a person can do x, y, and z in the future, whether through re-education or retraining.
Eric Knowles has been providing expert economic witness testimony for well over ten years. He carries on the successful tradition of his father, David Knowles, PhD., who started the business in 1979.
He has provided his services as an expert witness by providing economic damage and P&L calculations in both state and federal court. He’s been retained on matters in multiple states such as:
Expert in Calculating Economic Damages
An expert economic witness can help paint an accurate picture of the financial state of the plaintiff before and after the incident. They will also help project past and future income and earning potential.
At The Knowles Group, we’re one of the top economic consulting firms in the U.S. and have testified in multiple state and federal courtrooms on behalf of both plaintiff and defense.
If you are looking for a financial or economic consulting firm to help calculate economic damages, give us a call at (206) 860-9477 or contact us via our website to learn more about the services we provide.
Economic Damages Cases We’ve Worked On
Loss of earnings, fringe benefits and future care services as a result of sexual assault
My analysis included a loss of earnings, fringe benefits, work-life expectancy and future care services. I estimated the plaintiff's earnings capacity upon graduating with a bachelor's degree from the age earnings data from the Bureau of Labor Statistics and compared that to her actual earnings and assumed truncated work-life expectancy from the plaintiff's independent medical evaluation. Two distinct loss scenarios were presented based on probable reductions in the plaintiff's active work duration as a result of the assault. My analysis also included calculating the accompanying loss of fringe benefits (both health insurance and pension contributions) and the present value of recommended life care services over the course of the plaintiff's life expectancy.
Loss of future earnings capacity and life care services as a result of childhood abuse
My analysis included projected earnings sourced from the age earnings data correlating to probable educational attainments from the Bureau of Labor Statistics. Differing loss scenarios by educational outcomes had the abuse not occurred during childhood. The foundation for mitigating earnings was from the opinions of another expert who evaluated the plaintiff and placed future earnings constraints at no more than minimum wage. Damages also included loss components for health insurance (to be provided through employer) and a loss of pension contributions (defined contribution plan) from future employers. Finally, my office provided the present value of all future care needs for the plaintiff as a result of the abuse.
Loss of employment and earnings capacity as a result of an Assault
My damage analysis considered the inability of the plaintiff to return to the job of origin as a result of the incident. Damage components of loss included a past wage loss, the present value of lost future earnings capacity (supported by job of origin and age earnings data by education) offset by mitigating employment with significant limitations due to the assault. I estimated the plaintiff's statistical work-life expectancy, the present value of future life care services for the plaintiff and the truncated active work duration due to PTSD and other mental/emotional impairments as a result of the assault. Future life care services are presented by a certified life care planner and require calculations based on estimated costs, frequency and duration.
Loss of earnings and pension as a result of wrongful termination and hostile work environment
My damage analysis focused on the the plaintiff's earnings history with a lengthy career working for the City of Boise as well as applying my knowledge of the Public Employees' Retirement System for Idaho (PERSI). The loss calculations involved the plaintiff's remaining statistical work-life expectancy, her inability to reenter the workforce for mitigation purposes, and the reduction in her PERSI defined pension benefit at her fully vested age. The value of healthcare benefits had to be weighed against the cost of Medicare Plan B, which the plaintiff was eligible for and enrolled in.
Loss of past wages and future care services as a result of medical malpractice-misdiagnosis for Nurse
My analysis included the estimation of the plaintiff's pre-incident earnings capacity as an RN offset by her actual mitigating employment. Mitigation included the plaintiff taking additional time away from work to attend graduate school and elevate her earnings ceiling. The loss period concluded when the plaintiff made the choice to attend graduate school and potentially higher paying positions as a Nurse Practitioner or Nursing Instructor. The plaintiff also had significant future life care needs that I presented in today's dollars by estimating her future healthy life expectancy and applying net discount factors to the recommended services.
Past wage loss and future life care services as a result of a motor vehicle accident
My analysis included the calculation of the plaintiff's past wage loss, estimating future loss of earnings as a result of a forced transition to part-time, and the present value of recommended future life care services to make the claimant whole. Various earnings loss scenarios focused on the plaintiff's pre-incident earnings capacity offset by the estimated mitigating part-time work schedule of 25 to 35 hours per week. Statistical work-life expectancy, life expectancy and net discount variables for the presentation of all future cash flows in today's dollars were utilized.
Loss of earnings as a result of school dismissal of student
My analysis included projecting the plaintiff's future earnings after finishing her graduate program with the rest of her class and ultimately entering the workforce. These pre-incident earnings were then compared to the plaintiff's mitigating earnings correlating with a bachelor's degree. The present value of lost future earnings required two specific statistical work-life expectancies (by education), the plaintiff's average earnings for her future vocation, and the average earnings for a female with a bachelor's degree (Bureau of Labor Statistics). In addition to this calculated loss of earnings, a loss component for the loss of employer contributions to the plaintiff's defined contribution plan (401(k)) was also presented.
Business Interruption Loss of Long-Haul trucking company due to Product Liability and Negligent Misrepresentation
My analysis included projecting lost hauling revenues and variable expenses for the time period when plaintiff's Semi-Truck and Trailer were inoperable due to transmission malfunction. Calculated trending monthly long-haul revenues and expenses from past monthly profit & loss statements from the trucking business. In addition to lost business, developed components of loss for increased cost of labor (hired 3rd party to haul contracted goods), repairs, and lost contract for one of the company's biggest clients.
Family residence foreclosure due to attorney malpractice/negligence
My analysis included calculating the lost equity value in a family's home that was lost at foreclosure as a result of attorney malpractice. Damages were calculated utilizing proposed mortgage interest rates, the growth of equity value in the family's home over time and deducted projected future mortgage principal and interest payments. The calculated awarded economic damages were compared to current real estate market to answer the question whether the family could purchase a similar home in a similar community with a similar monthly mortgage payment.
Wrongful death matter of a 17-year-old High School student
My analysis included calculating the future net accumulation of savings (future earnings minus future personal spending) for the decedent. This involved presenting the most probable educational attainment, providing the statistical work-life expectancy based on age and education, correlating annual earnings capacity from this education level and deducting future personal spending, which is a negatively correlated to estimated earnings. Damage opinions included the present value of all future net accumulation to the estate as well as the critique of opinions from opposing economist.
Business Interruption losses caused by Construction Activity
A residential multi-family building was erected in Portland Oregon and a neighboring auto-repair business claimed business interruption and losses due to the claimant's building experiencing settlement (due to construction) that ultimately rendered a portion of the business to be inoperable. My analysis included reviewing all profit and loss statements and tax returns for the auto-repair business, both before and after the subject incident and interruption. I projected what the business would have experienced in the way of revenues, expenses and net income based on previous years and compared it to the actual returns for the business subsequent to the events. My analysis also included projecting future losses if the business would have to close during construction to resolve any problems and disputes.
Employment related matter involving a physician and hostile work environment
Due to the events and actions that occurred within the plaintiff's work environment (hospital), the doctor found herself in a .5 full-time employment position or part-time. The plaintiff was not able to return to full-time work as a result of the incidents. My analysis included calculating the doctor's remaining statistical work-life expectancy at the time of the subject incident, her pre-incident earnings capacity from past tax returns when she was working full-time and comparing that to her actual earnings capacity when transitioned to part-time. The doctor's compensation was a complex formula involving overtime and on-call time along with bonuses and other fringe benefits. Estimated damages includes past compensation and fringe benefits as well as the present value of all future compensation (earnings, bonuses, healthcare and pension benefits).
Medical malpractice case involving fisherman with Hodgkin’s Lymphoma
A 26-year-old male who had developed Hodgkin's Lymphoma was making a claim of Negligence and Medical malpractice against an Alaskan medical facility. Economic damage components of the case involved the alleged diminishment to the future earnings capacity. Plaintiff had continued working in the demanding fishing industry with physical constraints. Due to his age, proposed mitigation included returning to school and attaining his degree. Key assumptions in the case included an adjusted work-life expectancy at the completion of his degree, age earnings data for males with a college degree, and the tuition costs and fees for school. The economic analysis also included calculating the future lost profits for the plaintiff's hypothetical fishing business (captaining his own vessel).
Wrongful death claim with Complaint of Medical Malpractice and Delayed Diagnosis
The case involved the patient developing colon cancer over a period of several years and two separate hospital facilities in Southwest Alaska and Anchorage. The decedent was retired and as a result there was no loss of earnings component to the wrongful death claim. One of the unique components to the case was the valuation of subsistence as the decedent provided food for the household through hunting and fishing. In order to properly value this lost subsistence to the surviving spouse, an estimate was made for the cost of food for the household at this rural Southwest location. Next, the analysis would go on to assess as to how much the subsistence would offset the household's cost of feeding and heating the household. The other loss component was household services offered by the decedent for the family. Objective survey data when available is to be utilized by the forensic economist and in this case, we had well-established publishers of household services data and household maintenance hours, isolated by gender, age and family dynamics. These household hours are monetized with the average hourly rate of pay one could expect to pay a third party to provide those services in the home for the surviving spouse. Household hours were reduced by the number of hours that would benefit the decedent and the reduction in family size. Consideration for normal life expectancy and fully-functioning healthy life expectancy for this Alaskan Native was a key assumption for the analysis.
Wrongful death matter and complaint of Medical Malpractice involving Alaskan hospital facility
This case involved a wrongful death matter of a retiree who developed advanced stage liver cancer. My services included assessing any lost value of pension to the surviving spouse from the decedent's TRS (Teachers Retirement System) benefits. This component to the analysis included projecting the decedent's personal consumption (spending) of his own pension benefit and compare the pre-incident net pension benefit to the resulting surviving spouse pension benefit. The other component to the analysis was calculating any loss of household services to the surviving spouse. This process includes utilizing objective 3rd party survey data for the average number of hours we would expect the decedent to work in the maintenance of his home (assuming similar age, employment and family dynamics). The average future hours that would have been performed by the decedent are monetized using an average hourly wage that the surviving spouse will have to pay a 3rd party to perform these services. Household survey hours must be reduced for the number of hours that would have benefited the decedent only and the reduction in household size. Some of the other key assumptions in the case were the rate of consumption and the decedent's fully functioning health life expectancy.